Stocks Seesaw; Dow Rises by 0.25

By ROBERT J. COLE

Published: May 4, 1991

After three good days, Wall Street had a tough time yesterday deciding what to do; conflicting road signs kept investors guessing.

So, after a choppy day that toppled the Dow Jones industrial average 14 points, lifted it 12, brought it down again 14 and lifted it again 19, the Dow ended about where it began -- ahead 0.25, to 2,938.86.

Strong rate cuts from the Fed and subsequent reductions in the prime rate lifted the Dow blue chips 26.48 points for the week.

This brought the Dow within 65 points of its all-time high of 3,004.46 set a little more than two weeks ago.

Trading on the New York Stock Exchange dropped to 158.2 million shares, from 187.1 million on Thursday, and the 748 advances nearly matched the 749 declines. Sixty-eight stocks climbed to 52-week highs and only five dropped to 52-week lows. Heavy Program Selling

Birinyi Associates, which tracks program trading, reported heavy computerized selling near the opening and strong program buying near the close. But over all, it said, the activity clipped the Dow 8 points.

Wall Street, though, is now in a quandary whether to get in or get out.

On one hand, the Labor Department reported yesterday that the unemployment rate fell last month to 6.6 percent from 6.8 percent in March, or more than expected. That should be good for stocks because it implies economic improvement and stronger earnings. But traders want more evidence.

On the other hand, traders said the Fed drained money from the banking system yesterday to raise the Fed funds rate that banks charge each other to 5 3/4 percent, and that is bad for stocks.

Still, in their current strategy report, Steven G. Einhorn and Abby Joseph Cohen, co-chairmen of the investment policy committee at Goldman, Sachs & Company, said, "We do not believe that the bull market is over." They said stocks can continue to gain for these reasons:

*Foreign central banks will ease monetary policy.

*Inflation and interest rates in the United States will be held down by weak global growth, falling foreign rates and a rising dollar.

*Economic and profit recovery in the United States could be accompanied by a modest improvement in inflation.

In his weekly report, Greg A. Smith, chief investment officer for Prudential Securities, made a case for another 10 percent rise in stocks.

In one of the day's best gains, Kellogg rose 5 1/2, to 96. Prudential Securities had issued a report on the company, William Blair & Company raised its earnings estimate and Business Week ran a favorable article.

Storage Technology rose 3 1/2, to 45 1/4, in heavy trading despite the sale of 3.45 million shares at $41 apiece. Stephen Cohen of Soundview Financial, which follows technology stocks in Stamford, Conn., argued that the offering would not dilute the earnings per share because the 8 percent additional stock would be covered by interest on the money raised.

Table: "The Favorite Stocks" shows performance of the 15 issues with the most shareholders.